Some publishers today push ROAS without thinking that they can induce marketers to feel obliged to spend the budget without truly understanding the contribution margin of each euro spent on an advertising activity and therefore they think of not losing impressions without asking themselves if those impressions really contribute to a positive net revenue . ROAS does not measure the true impact of one advertising channel on another, like display campaigns on search, nor does it offer an understanding of the marginality of the investment in euros for the various media, which instead provides the ROI.
ROAS: A Practical Application
Someone at this point might say that ROAS is a KPI a bit like many others, but in order to optimize my campaign can't I simply consider CTR, CR and CPA? In part yes, but let's remember that like any business activity, online find investor through investor database advertising has the objective of generating income for the company and not just traffic or conversions. This is where ROAS comes into play.
The following table could be our usual excel file with the monitoring of multiple campaigns:
Campaign 3 has a higher CTR than the others – so it has a greater ability to convert impressions into clicks – and the lowest CPC. Great.
Campaign 4 has a very high CPC, it's better to abandon it, but before doing so let's consider some other data, also because the information above doesn't tell us anything about the quality of these clicks.
Example of application of the ROAS formula on advertising campaigns
CR conversion rate = Leads / Clicks *100
CPL Cost Per Lead = Cost / Leads
A good balance between CR and CPL is given by campaign 3, which has the lowest cost to acquire a lead or customer, even if its ability to convert clicks into leads is not as high as campaign 1, which still has a CPL that is more than double.
Campaign 4 has a very high CPL: it remains the campaign that is likely to be torpedoed first.
Return On Advertising Spend: Let's make some observations
The CR of campaign 3 is almost half of the CR of campaign 1, which means that for some reason the traffic of campaign 1 finds something more interesting on the site or landing page than the users generated by the traffic of campaign 3.
It is possible that the traffic from campaign 3 is low quality and therefore the leads generated by it are also low quality, but how can you find out for sure.